Economy stuck in low gear, forecast says

Get ready for another year of slow economic growth, across the country and in California.

That’s according to a forecast presented Monday in Costa Mesa by economists at Orange County’s Chapman University. Their message: The economy is stuck in low gear.

“The current mild expansion pales in comparison to previous recoveries,” says the forecast, from Chapman’s A. Gary Anderson Center for Economic Research. “But despite its weak nature, and perhaps because of it, the recovery is still in gear. It is going on 53 months. By now, most other recoveries would be experiencing accelerating inflation and tightening labor markets. Yet, there is no sign of those pressures.”

But there are positive patterns for both California and the United States: Chapman expects jobs to grow, exports to increase, and construction activity to improve. Overall, Chapman expects the nation’s gross domestic product to increase from 1.7 percent in 2013 to 2.2 percent in 2014. That’s a bit slower than the 2.8 percent it grew in 2012, but would be the fifth consecutive year of expansion since production declined by 2.8 percent in 2009.

There is, however, at least one headwind coming in 2014: Chapman expects the Federal Reserve to begin tapering its $85 billion stimulus program that keeps mortgage and other long-term interest rates low. The Federal Open Market Committee has said it would begin to reduce the bond buying once the economy improves enough. It just hasn’t said when.

“The economy is going to do a little bit better, obviously that gives them justification,” said Esmael Adibi, director of the Anderson Center, said. “Secondly, this issue is becoming a little political now... I think they’re under pressure even if the economy is not robust.”

As a result of the tapering, Chapman predicts that long-term interest rates will increase by 1 percent next year.

Here are some other forecasts from Chapman:

Jobs: Chapman projects California to add 332,000 payroll jobs in 2014, or 2.3 percent growth. That’s up from the 1.9 percent growth and 267,000 it estimates will be added in 2013 (Last year, the university predicted 234,000 new jobs in 2013). Adibi said the growth would come mostly in construction, and then health care, due to an aging population and the implementation of the Affordable Care Act.

Health care jobs: The university projects a 17 percent increase in health care employment through 2020, excluding the act, also known as Obamacare. But it also projects another 8 percent in jobs once the law is fully implemented. Overall, the university expects 23,000 new jobs a year in California’s health care industry.

Housing: Chapman predicts a decline in housing appreciation due to a drop in housing affordability. Across the country, the university says housing appreciation will fall drastically, from 11.2 percent this year to 3.1 percent in 2014.

Consumer spending: A projected increase in personal income means that taxable sales will increase 5.9 percent in California, up from 5.1 percent in 2013.

Construction: Construction spending is expected to continue increase in 2013 and again in 2014. Total building permit valuation is forecast to grow 16 percent in California.